nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒02‒12
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The French Pension Reforms and their Impact on Unemployed Older Workers By Kadija Charni
  2. On the Asset Allocation of a Default Pension Fund By Dahlquist, Magnus; Setty, Ofer; Vestman, Roine
  3. Old before their time: The role of employers in retirement decisions By Bello, Piera; Galasso, Vincenzo
  4. Why are the elderly more averse to immigration when they are more likely to benefit ? evidence across countries By Schotte,Simone Raphaela; Winkler,Hernan Jorge
  5. Greying the budget : ageing and preferences over public policies By de Mello,Luiz; Schotte,Simone Raphaela; Tiongson,Erwin H. R.; Winkler,Hernan Jorge
  6. Will the Explosion of Student Debt Widen the Retirement Security Gap? By Alicia H. Munnell; Wenliang Hou; Anthony Webb
  7. Social insurance with competitive insurance markets and risk misperception By Cremer, Helmuth; Roeder, Kerstin
  8. Unequal Bequests By Francesconi, Marco; Pollak, Robert A; Tabasso, Domenico
  9. Gouverner sans les instruments ? La difficile construction des politiques relatives à la perte d'autonomie des personnes âgées By Sébastien Gand; Elvira Periac

  1. By: Kadija Charni (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université)
    Abstract: This paper analyzes labour market position of unemployed older individuals after the implementation of two major pension reforms in France. We use the French Force Labour Survey for the period 2003-2011 to assess the effects of the 2003 and the 2010 pension reforms on the exit rate from unemployment of individuals aged over 54. Using a difference-in-differences approach, we look at the effects of these reforms on the exit from unemployment to employment, and into inactivity. We find that the 2003 pension reform reduces significantly the exit to employment, while there is no significant impact of the pension reform on the exit to inactivity. For the 2010 reform, we show that the reform leads to an increase of the probability to go back to work. At the same time, the transition out of labour force through inactivity exit also rises. Unemployment and other social schemes are used as a bridge to retire early.
    Keywords: difference-in-differences estimation,unemployed older workers,pension reforms
    Date: 2016–01
  2. By: Dahlquist, Magnus; Setty, Ofer; Vestman, Roine
    Abstract: We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals and their holdings inside and outside the pension system, we find substantial heterogeneity among default investors in terms of labor income, financial wealth, and stock market participation. We build a life-cycle consumption-savings model incorporating a DC pension account and realistic investor heterogeneity. We examine the optimal asset allocation for different realized equity returns and investors and compare it with age-based investing. The optimal asset allocation leads to less inequality in pensions while it moderates the risks through active rebalancing.
    Keywords: age-based investing; default fund; life-cycle model; pension plan design
    JEL: D91 E21 G11 H55
    Date: 2016–01
  3. By: Bello, Piera; Galasso, Vincenzo
    Abstract: Do elderly workers retire early voluntarily, or are they induced (or even forced) by their employees? To establish the relevance of the labor demand component in retirement decisions, we consider a trade liberalization between Switzerland and the EU -- the Mutual Recognition Agreement (MRA). A vast literature suggests that these trade liberalizations induce firms to relocate and to restructure, with large compositional effects on the labor market particularly for the elderly workers, who face higher mobility costs. Using Swiss Labor Force Survey data, we use a difference in differences approach to compare early retirement behavior in three periods (pre-liberalization, announcement, and implementation) for three groups of industries. MRA industries represent our treatment group; control groups are non-MRA manufacturing industries, and services. Our empirical results show that elderly workers are more likely to retire early in the MRA sector during the announcement period, and that the employment of young (30-years old) male workers increases. The distribution of wages by age is instead unaffected. Additional empirical evidence using Swiss Business Census and UN Comtrade data suggests that the increase in early retirement in MRA is not explained by more firms' exits, nor by more early retirement among the exiting firms. It is rather the surviving MRA firms, which react to the increase in competition by adjusting their labor force and use more early retirement.
    Keywords: early retirement; firms' restructuring; labor demand of elderly workers
    JEL: H55 J14 J23 J26
    Date: 2015–12
  4. By: Schotte,Simone Raphaela; Winkler,Hernan Jorge
    Abstract: Using household surveys for 24 countries over a 10-year period, this paper investigates why the elderly are more averse to open immigration policies than their younger peers. The analysis finds that the negative correlation between age and pro-immigration attitudes is mostly explained by a cohort or generational change. In fact, once controlling for year of birth, the correlation between age and pro-immigration attitudes is either positive or zero in most of the countries in the sample. Under certain assumptions, the estimates suggest that aging societies will tend to become less averse to open immigration regimes over time.
    Keywords: Science Education,Gender and Social Development,Youth and Government,Scientific Research&Science Parks,Population Policies
    Date: 2016–02–02
  5. By: de Mello,Luiz; Schotte,Simone Raphaela; Tiongson,Erwin H. R.; Winkler,Hernan Jorge
    Abstract: This paper looks at how individual preferences for the allocation of government spending change along the life cycle. Using the Life in Transition Survey II for 34 countries in Europe and Central Asia, the study finds that older individuals are less likely to support a rise in government outlays on education and more likely to support increases in spending on pensions. These results are very similar across countries, and they do not change when using alternative model specifications, estimation methods, and data sources. Using repeated cross-sections, the analysis controls for cohort effects and confirms the main results. The findings are consistent with a body of literature arguing that conflict across generations over the allocation of public expenditures may intensify in ageing economies.
    Keywords: Debt Markets,Youth and Government,Health Monitoring&Evaluation,Scientific Research&Science Parks,Population Policies
    Date: 2016–02–02
  6. By: Alicia H. Munnell; Wenliang Hou; Anthony Webb
    Abstract: Student loan debt was $1.2 trillion in 2015, compared to just $0.2 trillion in 2003. It now accounts for more than 30 percent of total household non-mortgage debt, having surpassed credit card debt in 2011. The average student debt level for recent college students in 2013 was $31,000. The question is whether start­ing out $31,000 in the hole could have a big impact on households’ retirement preparedness. This brief uses the National Retirement Risk Index (NRRI) to assess the impact of growing student debt on the retirement security of today’s working-age households. The NRRI is calculated by comparing households’ projected replacement rates – retirement income as a percentage of pre-retirement income – with target replacement rates that would allow them to maintain their standard of living. These calcula­tions are based on the Federal Reserve’s Survey of Consumer Finances, a triennial survey of a nation­ally representative sample of U.S. households. As of 2013, the NRRI showed that, even if households worked to age 65 and annuitized all their financial assets (including the receipts from reverse mortgages on their homes), 51.6 percent of households were at risk. The question at hand is how this percentage will be affected by the growth in student loans. The discussion proceeds as follows. The first sec­tion briefly describes the nuts and bolts of the NRRI. The second section explores the growth in student debt and the paths through which it can affect retire­ment security. The third section looks at the relation­ship between having student debt and retirement risk status. The fourth section estimates the impact on the NRRI of assuming that all of today’s working households started out with the same level of loans as recent college students. The results show that such an increase in student debt would raise the share of households at risk in retirement by 4.6 percentage points. The final section concludes that the growth of student debt will add to an already alarmingly high rate of households that are not on track for retire­ment.
    Date: 2016–02
  7. By: Cremer, Helmuth; Roeder, Kerstin
    Abstract: This paper considers an economy where individuals differ in productivity and in risk. Rochet (1991) has shown that when private insurance markets offer full coverage at fair rates, social insurance is desirable if and only if risk and productivity are negatively correlated. This condition is usually shown to be satisfied for many health risks, but it appears to be violated for the old age dependency risk (mainly because longevity in turn is positively correlated with productivity). We examine the role of uniform and nonuniform social insurance to supplement a general income tax when neither public nor private insurers can observe individual risk and when it is positively correlated with wages. Consequently, a Rothschild and Stiglitz (1971) equilibrium emerges in the private insurance market and low-wage/low-risk individuals are not fully insured. We show that even when social insurance provided to the poor has a negative incentive effect, it also increases their otherwise insufficient insurance coverage. Social insurance to the rich produces exactly the opposite effects. Whichever of these effects dominates, some social insurance is always desirable. Finally, we introduce risk misperception which exacerbates the failure of private markets. The insurance term now reflects the combined failure brought about by adverse selection and misperception. Now the low-risk individuals are not only underinsured, but also pay a higher than fair rate. However, and rather surprisingly, it turns out that this does not necessarily strengthen the case for public insurance.
    Keywords: adverse selection; long-term care; optimal taxation; overconfidence; social insurance
    JEL: D82 H21 H51
    Date: 2016–01
  8. By: Francesconi, Marco; Pollak, Robert A; Tabasso, Domenico
    Abstract: Using data from the Health and Retirement Study (HRS), we make two contributions to the literature on end-of-life transfers. First, we show that unequal bequests are much more common than generally recognised, with one-third of parents with wills planning to divide their estates unequally among their children. These plans for unequal division are particularly concentrated in complex families, that is, families with stepchildren and families with genetic children with whom the parent has had no contact (e.g., children from previous marriages). We find that in complex families past and current contact between parents and children reduces or eliminates unequal bequests. Second, although the literature focuses on the bequest intentions of parents who have made wills, we find that many elderly Americans have not made wills. Although the probability of having a will increases with age, 30 percent of HRS respondents aged 70 and over have no wills. Of HRS respondents who died between 1995 and 2010, 38 percent died intestate (i.e., without wills). Thus, focusing exlusively on the bequest intentions of parents who have made wills provides an incomplete and misleading picture of end-of-life transfers.
    Date: 2015
  9. By: Sébastien Gand (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Elvira Periac (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris)
    Abstract: Engagée dans un processus de vieillissement démographique jusqu'en 2060, la France, comme l'ensemble des pays occidentaux, cherche à déployer des aides et des services pour les personnes âgées en perte d'autonomie et leurs proches. Cette politique publique est encore en voie de construction et souffre particulièrement d'une difficulté à organiser une gouvernance adaptée à l'implication d'acteurs hétérogènes et situés à différents niveaux d'intervention. Nous proposons tout d'abord un état des lieux de cette problématique avant d'offrir des perspectives pour répondre au double défi du vieillissement de la population et de l'organisation de ces politiques multi-parties prenantes, représentatives des mutations de l'action publique contemporaine et de ses incertitudes.
    Keywords: politique publique, personnes âgées, dépendance, instrument de gestion, instrument d'action publique
    Date: 2016–01–15

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